Global Brands Group has completed the sale of its Spyder division in South Korea to a private equity firm and will use the $19.5 million raised to help it continue to operate as it negotiates with lenders over mounting past-due debts.
On Thursday morning, the Hong Kong-based company said that while the initial plan was to use the proceeds from the sale of Global Brands Group Korea Ltd. to repay part of its existing bank debt, the situation has changed.
Global Brands Group had previously reported a net loss after taxes of $120 million for the six months ended Sept. 30, 2020. The company said its liabilities exceeded its assets by $899 million at that time. Included among its liabilities were loans of $281 million, trade payables to external parties of $374 million and trade payables to related companies of $627 million. The trade payables are past due.
The company reiterated Thursday what it had said in the past that these debts “may cast significant doubt about the group’s ability to continue as a going concern.” It added that it has “been pursuing a number of measures to generate adequate financing and operating cash flows” in order to continue operating.
“The ongoing pandemic and geopolitical uncertainties, as well as structural shifts in the retail industry continue to inhibit the group’s initiatives to improve its financial position,” GBG said Thursday.
“As the group approaches its peak season for the shipment of goods to its customers and in light of the group’s liquidity situation,” it is in the “best interest of the company and its shareholders…to explore retaining all or part of the net proceeds to fund the group’s operations instead of applying the full amount to pay down the bank debt” and it has “commenced discussions with the lenders to amend its repayment obligations.”
As part of these discussions, GBG has agreed to transfer the proceeds of the South Korean sale into an account the lenders will control and will seek the consent of the lenders for withdrawals to fund its continued operations.
It also warned potential investors that they should “exercise caution when dealing in the shares of the company.”
In April, GBG entered into a purchase agreement with Alpha Vista Investment Co. Ltd., a private equity firm in Korea, for its Spyder business in Korea for $40 million. Spyder is owned by Authentic Brands Group, which licensed the South Korean division to GBG. ABG gave its blessing to the deal since the same management team will remain in place following the sale, the company told WWD.
According to GBG, the Spyder business in Korea contributed about $70.5 million to its total revenue during the nine-month period ended Dec. 31, 2020, compared to the $472.9 million achieved through its other businesses.